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Patton Paints Corporation has a target capital structure of 25% debt and 75% common equity, with no preferred stock. Its before-tax cost of debt is 11% and its marginal tax rate is 40%. The current stock price is P0 = $32.00. The last dividend was D0 = $2.00, and it is expected to grow at a 6% constant rate. What is its cost of common equity and its WACC? Round your answers to two decimal places.
rs = %
WACC = %
At year-end 2015, Wallace Landscaping’s total assets were $1.9 million and its accounts payable were $390,000. Sales, which in 2015 were $2.1 million, are expected to increase by 20% in 2016. How much new long-term debt financing will be needed in 20..
The earnings, dividends, and common stock price of Shelby Inc. are expected to grow at 5% per year in the future. Shelby's common stock sells for $22.75 per share, its last dividend was $1.80, and the company will pay a dividend of $1.89 at the end o..
If market interest rates rise: How can investors reduce the risk associated with an investment portfolio without having to accept a lower expected return?
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The real risk-free rate is 2%, and inflation is expected to be 2.75% for the next 2 years. A 2-year Treasury security yields 10%. What is the maturity risk premium for the 2-year security?
Michael's, Inc. just paid $2.60 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 5.60 percent. If you require a rate of return of 9.8 percent, how much are you willing to pa..
Bayou Okra Farms just paid a dividend of $3.30 on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the..
A Bond Valuation: Meredith Motors' bonds have 10 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 7%, and the YTM is 9%. What is the bond's current market price?
An investor is considering purchasing one of the following three stocks. Stock X has a market capitalization of $7 billion, pays a relatively high dividend with little increase in earnings, and has a P/E ratio of 11. Which of the three would you clas..
Which one of the following will tend to increase the length of time a company will extend credit?
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